A Bermuda-based insurance and reinsurance company has agreed to buy CMG Mortgage Insurance Co. from joint owners CUNA Mutual Group and Arizona-based PMI Mortgage Insurance Co. and operate it in a distribution and reinsurance agreement with CMG MI.

The deal with Arch Capital Group Ltd.’s U.S. subsidiary, Arch U.S. MI, was announced Friday by the Arizona Department of Insurance, in its role as receiver for PMI, and by CUNA Mutual Group in Madison, Wis.

PMI filed for bankruptcy in November 2011 after it was seized by Arizona regulators and had begun paying only 50% of its claims. CMG and PMI each owned 50% of the company. During the receivership process, PMI was ordered to quit issuing new mortgage insurance commitments.

Arch U.S. MI will now acquire all equity interests in CMG MI and expects to close the purchase within 12 months, subject to regulatory approvals and approval from the Arizona receivership process.

The deal will “support the future growth of CMG Mortgage Insurance Company” while allowing the company to continue serving existing credit union customers and their members, the companies said Friday in a statement.

“Our goals have been consistent from the start of this process: Protect policyholders, deliver strong service to customers, and aim for a long-term, viable solution for credit unions to have a private mortgage insurer that is sensitive to and understands their unique mission,” CUNA Mutual President/CEO Jeff Post said in the statement.

“We are confident that, following the purchase of CMG MI by Arch, CMG MI will continue to provide the customer-focused products and services that have made CMG MI the long-standing market leader in meeting the mortgage insurance needs of credit unions,” Post said.

Arizona DOI Director Germaine Marks credited CUNA Mutual’s work with PMI and the receivers in executing the deal.

“The petition being filed for court approval of this agreement is a significant milestone and positive step in the PMI receivership,” Marks said. “The acquisition of CMG MI is an important component of the overall transaction with Arch and is a cornerstone of their commitment to the private mortgage insurance market.”

Sean Dilweg, CUNA Mutual Group vice president and product executive for CMG MI, said, “Similar to our successful partnerships with Liberty Mutual and State National Companies, CUNA Mutual Group will use its marketplace knowledge and distribution strengths, combined with Arch’s financial strength and commitment to mortgage insurance, to bring a stronger product solution to its credit union customers. We look forward to a strong partnership with Arch.”

The statement said Arch Capital Group Ltd. Can now enter the rapidly improving U.S. mortgage insurance marketplace and broaden its existing mortgage insurance and reinsurance capabilities.

“We are very gratified that PMI’s exceptionally strong management team and staff will be joining Arch. Together with our senior executives, they will form an industry-leading team with broad capabilities to meet our clients’ needs over the long term,” said Marc Grandisson, chairman/CEO of the $5.75 billion Arch Worldwide Reinsurance Group

“We are also extremely pleased to partner with CUNA Mutual Group on an ongoing basis. Their access to the credit union marketplace and brand reputation should allow us to secure a strong flow of credit union business,” Grandisson said.